This Week in Logistics News (February 26 – March 2, 2018)

When the Red Sox beat the Yankees in the American League Championship Series this year, I can say I was there at the beginning of the journey.

Earlier this week, I scratched an item off my bucket list: taking my sons to Fort Myers to see a couple of Red Sox spring training games. Great games (the Red Sox beat the Orioles and Pirates), great weather (in the mid 80s), and great memories (autographs from players and Hall of Fame manager Tony La Russa).

Now, it’s back to reality: catching up on work and emails, in the middle of a nor’easter.

So, I’ll keep it brief today. Here’s the supply chain and logistics news that caught my attention this week:

Trade War Brewing: History Repeating Itself

“Trade wars are good, and easy to win,” tweeted President Trump this morning, after announcing plans yesterday to impose tariffs on imported steel and aluminum.

History has a way of repeating itself, usually for the worse.

The last time the U.S. imposed tariffs on steel was in 2002 by President George W. Bush. As Wikipedia documents, “the temporary tariffs of 8–30% were originally scheduled to remain in effect until 2005,” but they were lifted in December 2003 after the World Trade Organization “authorized more than $2 billion in sanctions [against the U.S.]” and “the European Union threatened to counter with tariffs of its own on products ranging from Florida oranges to cars produced in Michigan, with each tariff calculated to likewise hurt the President in a key marginal state.”

In response to Trump’s announcement, China, Canada, and other countries are already threatening to take retaliatory measures. This morning, as reported by the Reuters, “Electrolux , Europe’s largest home appliance maker, said it would delay a planned $250 million investment in Tennessee” in response to the proposed tariffs. “We are putting it on hold. We believe that tariffs could cause a pretty significant increase in the price of steel on the U.S. market,” Electrolux spokesman Daniel Frykholm said.

“Mr. Trump seems not to understand that steel-using industries in the U.S. employ some 6.5 million Americans, while steel makers employ about 140,000,” writes the Editorial Board of the Wall Street Journal in a op-ed today. “Transportation industries, including aircraft and autos, account for about 40% of domestic steel consumption, followed by packaging with 20% and building construction with 15%. All will have to pay higher prices, making them less competitive globally and in the U.S.”

Trade wars are never good. There are no winners in a trade war. Everybody loses.

Assuming the proposed tariffs are implemented, and other countries impose their own retaliatory tariffs, supply chain professionals will be busy in the weeks and months ahead determining what changes to make in their sourcing and manufacturing practices and networks. Companies that have already modeled and simulated these risks and scenarios, months or even years ago as part of their ongoing supply chain design and risk management activities, will be able to respond faster and more intelligently to these changes than their competitors.

And with that, have a Happy Weekend.

Song of the Week: “Getaway” by Saint Motel